Henry Innis is an ex-agency strategist who now consults in the innovation, digital and product space. In this opinion piece he argues that the agency-client relationship is broken and it requires a leaner, meaner but not necessarily more creative approach…
When I was in agency land, one of the things that used to consistently come up was a complaint about procurement departments. Client’s budgets and in-house capabilities were increasing and the ever-lasting question was simple: why should we pay large hourly rates for external (and sub-par) work? Why do we have these guys on a large retainer if they’re not working hard?
Clients don’t always need agencies
Most of the time, bluntly, clients could get 80 per cent of what an agency contributes from in-house resources. Or failing that (if they wanted to put in the effort) good external freelancers (or small teams). Throughout agency land it was rare that the full resources of an agency in an agency environment would be needed.
That makes you understand, if you’re not an agency guy, why procurement departments are so keen to squeeze agencies. Yes, they might not be getting the most creative work possible from their agency partners. But the hard truth is most of the time they don’t need extremely creative work. Not all marketing needs to be borne of creativity. Most of the time it’s about understanding and communicating to people about what they want.
Take Apple. They’ve had some extremely good campaigns over the years. But their bread and butter is product announcements — having an amazing set of new features to talk about each year that makes them the story.
Another example comes to me from my own experience. One campaign I helped out on wasn’t based around creativity at all — but pure, hard targeting of audiences with direct response messages. It wasn’t work that needed the resources of 5–6 people in an agency. It needed a couple of smart people making decisions and an in-house production team. When we overcomplicated it with creativity, we often reduced our output, which impacted the results we got. The reality was we didn’t have to be creative — we had to be smart about what people wanted.
And you know what? It sure was effective. Later, the client rightly questioned what they were paying for. It turned out that what they probably needed were some clever freelancers working with a great media agency, rather than a suite of agencies working for them.
Because agencies are considered a crucial part of the marketing ecosystem, clients continuously pay for their services. But because it’s easy to identify that you’re not getting the most value out of your agency, procurement continually tends to drive down the cost base. The result of this is a challenging cycle for both agencies and clients: a race to the bottom where one side isn’t getting the people it needs and the other isn’t getting paid fairly.
Briefs can exacerbate that problem
When an agency is briefed, they’re briefed by a client trying to (essentially) give creative direction or ask the agency for an answer. The challenge to this is often the agency is on retainer, and is more interested in trying to please the client/stakeholder giving the brief than providing any real answers.
Briefs are especially irritating because they set-up some assumptions, too. There’s a given weighting as to the advertising spend, the direction of the brief, the products being promoted and more. The unfortunate thing is briefs are often trying to solve all business challenges instead of doing what they should — focusing your agencies in on business problems.
As a result, agencies are trying to retrofit creative thinking and solutions back to briefs rather than trying to uncover the problem. A common complaint from clients is that the agencies never really nail the brief. Why does that happen? Mostly because they’re trying to cover all bases in the brief and as a result, don’t give you (the client) the best thinking possible.
And retainers reduce competition to fix the problem
Agencies often value retainers extremely highly — they’re the mark of a partnership with a strong client. Except, mostly they’re not really.
Retainers are a funny thing for agencies. They provide a large amount of stability, but create two very distinct problems for agency culture:
- The agency is forced to sell in a large gamut of services, mostly political in nature, to service the client. And they’re often selling in hours rather than solutions as a result.
- The agency is in a less competitive environment when it has it’s revenue guaranteed. As a result, you might get more thought through ideas (because they have time to think on them), but less drive and willingness to make those ideas work in execution.
While agencies may love retainers (as they give their business model stability), the very essence of creativity is to be disruptive and changing. In a marketplace of ideas, reducing the level of competition doesn’t make much sense to do that.
Which gives us three clear issues…
- Most clients need specific people in agencies, rather than the agency itself. As a result they’re often paying bloated amounts to access 3–4 key personnel.
- Briefs force agencies to retrofit thinking to provide a client/stakeholder-driven solution rather than responding to business and market challenges.
- Retainers reduce the overall competition and drive of agencies to make things work. You might get more ideas and more audacious thinking, but you’ll also get less accurate thinking.
And we think the solution is renumeration
You hear a running theme around value-based renumeration between both agencies and clients. The argument goes something like this:
- Agency doesn’t feel it’s being valued and asks to be considered on a performance basis, but doesn’t want it’s margins being squeezed (so almost asks for a bonus in effect).
- Client doesn’t want agency being paid at all if they fuck-up, so ask only to pay in the event of success (so almost asks for the agency to take on all the risk in effect).
Both sides claim they’re talking about a better model, but they’re actually talking about a completely different thing altogether. Each side is asking the other to assume more of the risk.
On top of this, you have the fragmenting roster of agencies on clients anyway. Everyone is eating everyone else’s work (any agency that tells you they stick to their ‘digital’ or ‘traditional’ remit is flat out lying). Most agencies are lazily pitching against one another anyway — but doing it from the safety of their retainers. The result isn’t a competitive pitch for your business, but a political pissing contest between agencies.
The real solution: move from reactive to proactive
If you’re in the business of using agencies for what they are — creative change agents — then start using them as such.
Currently, the model with agencies is pretty broken. We’re expected to sit on big retainers, pitching ideas to try and please a client brief, then wondering why we’re not that passionate about the work either we or the clients are crazy about.
Basically, our current model makes us reactive to client challenges — and that means we start doing work that just… doesn’t work.
So, to change that, agencies and clients should redefine their relationship from client > agency to agency > client. And that means some structural changes to the relationship itself:
- Removing the need for briefs. Briefs are ways to shape and define creative thinking around your business challenges. If you have to brief your agency to get them to understand your business, they’re not the right agency for you anyway.
- Get rid of large retainers for agencies. If your agency isn’t good enough to sell you an idea, why should they be on retainer anyway? And if they good enough, they won’t need that retainer full stop.
- Start building client budgets around outcomes, rather than timelines. Customers don’t think around an annual planning budget. Neither should your marketing or product spend then.
- Pay agencies for their effort and their results. If you buy an idea, make sure the agency is getting paid properly (including for their pitch work). And if they achieve a strong, commercial result for you, make sure they see some of the upside. An agency doing good work should get paid handsomely for their effort. Why would you want to pay the same for a poor performing idea versus a good one?
When agencies are in a constant pitch mode, but know you’ve got the budget for ideas rather than quarters, they’ll be more likely to produce commercially effective work. And when you’re focusing them on business challenges rather than stakeholder briefs, you’re likely to get the right solution rather than the pleasing solution.
In essence, it would work a little like this:
- Rostered agencies are given the time of day and regular, deep insight into business objectives. Clients won’t give every agency this insight — because in practice, that would take up too much time in meetings.
- Slim down marketing teams to work as analysis units, rather than briefing units. They should be assessing the value of an idea to the business, not how well it fits their brief.
- Clients respond to ideas and agencies work to carry them through. Clients pay for both cost to pitch an idea and extra renumeration if an idea is highly successful.
How would this work in practice?
Often, the hardest thing about throwing up these sorts of ideas is seeing them work in practice. I thought I’d sketch out an idea for a large services firm and see how it lands. Let’s call them A, and their agencies B, C and D.
Agency E isn’t currently officially working with Client A, but they want to and are making sure to look out for them anyway.
Under the previous model, A would have a bunch of marketing managers responsible for managing the digital, traditional, acquisition and other bits of the brief. Basically — there are different departments that are signing off on different ideas.
Client A scraps that model, and instead has a marketing team of four tasked with getting the best out of their agencies. Importantly they’re a team whose job it is to synthesise top line business problems and answer questions from the agencies, or know who can give the agencies answers. In a sense the function of this group is business analysis rather than being a specific stakeholder.
Those four put together a monthly ‘business briefing’ to their agencies, discussing the various business challenges and underlying costs/revenues and similar. It gives the agency group a good understanding of what’s going on and at each briefing they’re reminded to pitch for ideas.
Agencies B and D see opportunities in their respective crafts and decide to pitch some ideas. Agency C hasn’t had a good idea, so they neglect to pitch.
Agency B pitches a big TV campaign to rebuild brand awareness, putting forward the hypotheses that brand trust is low and therefore they’re no longer performing well in the market. They’ve spoken to the consumer insights team and gotten that team on board and have convinced the CRM department that this can activate some of their leads. When they go in to pitch, they’ve already used their relationship with internal actors to validate their ideas — in effect working with business rather than marketing stakeholders.
Agency D pitches a digital-first acquisition campaign. It’s built around the premise that most of the marketing budget is wasted, and so they should be going after a narrower base to outflank competitors. It’s smart but requires a personalisation engine, so they tend to go back and try and work with something a little more specific. They try and win over the CRM team but fail, but the customer loyalty team is more receptive. They also get the internal content team onside by showing them how this campaign will commercialise a lot of their activity. When they go into pitch, they’ve again been forced to find and bring on-board the right internal stakeholders to get ahead.
In this scenario, the agency has been forced to be proactive. They’ve each had to identify their own path forward and engage broader business units outside of their direct stakeholders to secure success. Because the client is setup this way, they’ve automatically rewarded their agencies for breaking down their own internal silos. The agencies behave less like staff augmentation and more like external change agents.
The core team of four put some ROI projections around Agency B’s idea and choose to secure some budget for it. The ROI projections are important — they force the agency to be accountable to commercial outcomes, at least partially. And the agency remuneration model is built here — the costs of the agency are covered for execution, with more rewards built in for success.
When Agency B’s idea is implemented, they’re rewarded for their success by covering the costs of the pitch and execution. Extra comes if they hit commercial targets above expectations.
Finally, Agency E notices a trend in the market and pitches an idea to one of the four marketing folk at Client A. They come into see Client A, researching the correct stakeholders, and get buy-in. Working with a small internal department, they get a pilot case up, which validates them to have a discussion with the central marketing/BA team.
Why does this work?
It’s unconventional, given the way everyone complains about how well they are valued in the industry. But I think this kind of model helps the relationships on both sides for a few reasons.
- No more paying for bad work on retainers and more paying for good, effective and commercially driven work (rather than awards shows).
- More open communication between agencies and better value for overall money.
- More flexibility for departments to function as departments. E.g product, acquisition, retention.
- Better able to receive ideas for business challenges instead of briefs.
- Less personnel to craft (largely useless) briefs.
- More money. If you’re getting paid for good work, you’ll generally work to do better work.
- Passion. More chances for people to do the work that has an impact, rather than the work that pleases a stakeholder.
- Less competition in execution. How many times have you as an agency had a great idea that was built by another agency?
- Less constrained thinking. This model allows agencies to operate in true partnerships. And if you don’t think you can win work without a retainer, you probably shouldn’t be winning the work in the first place.
It’s a radical idea
There’s no doubt this model is a bit of a rant, designed to get some people thinking. But all in all we’ve got to have this discussion. And it’s my strong belief that agency land is broken.
The essence is this. Agency-client relationships aren’t good right now. And we’ve got to find ways to change the relationship from a reactive to a proactive one. Only then will agencies start addressing business problems with business solutions.
Read more of Innis’ articles at www.medium.com
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